In the mid-1990s, a wealthy family commissioned architect Steven Holl to build a country house on 33 acres in the Catskills. The result was a bright red, 2,900-square-foot house in a Y shape that cost about $1.3 million.
The family also built a boathouse (not designed by Holl) on the edge of a pond on their property and commissioned artist David Novros, whose art is in the permanent collection of the Museum of Modern Art, to paint frescoes inside it. The boathouse added roughly $500,000 to the property’s cost.
Eventually though, the family began to spend all its time in Europe. It decided earlier this year to put the house on the market. Its asking price is $1.6 million, or about 20% less than was poured into the property 23 years ago.
“There are no comps for it— zero,” says Raj Kumar, a broker at Select Sotheby’s International Realty, which is representing the property. “If a local realtor [valued it] by square foot, that house would be $400,000 at most, which is hilarious. It’s worth far more than that, but it has to be perceived value in the eye of the buyer.”
Kumar and the owners of the property are encountering the sobering reality of selling a “starchitect”-designed home: They might have gotten what they paid for in their house’s dramatic lines, luxurious materials, and prestigious pedigree, but when it comes time to sell, the market is often unforgiving.
Fashion designer Tom Ford’s Tadao Ando-designed, $75 million New Mexico ranch has sat on the market for three-and-a-half years; a Toshiko Mori-designed house in the Hudson Valley has been on and off the market since 2017, during which time it’s taken a $3 million price cut; an estate near Vail, Colo., designed by Annabelle Selldorf was initially listed for sale in 2015 for $33 million—it’s still for sale, with an asking price of $29 million.
“When somebody embarks on this road to have a world-renowned architect and a first-class building and an all-star cast of people to build their home, it’s really about a dream,” says Tye Stockton, a broker at LIV Sotheby’s International Realty who represents the Selldorf-designed Colorado house. The trick, he says, is “for the seller to realize that someone else might not place the same type of value on those components.”
Recouping Their Investment
Unlike most houses that languish on the market, many of these properties are not examples of faulty design, undesirable markets, or owners with unreasonable expectations of making a large profit. Instead, in multiple instances, sellers often hope simply to recoup their building cost.
“The owners wanted to list it for over $2 million to recover the money they put into it,” says Kumar, the broker trying to sell the Y house. “And I wanted to list it for $1.475 million, because a lot of people are looking for properties under $1.5 million. But we ended up settling for $1.6 million.”
The owners, he says, are aware that a sale won’t be immediate. “I feel much worse about it than the owners do,” he continues. “They’ve never put pressure on me. They said: ‘We totally know that it’s going to take time to sell this.’”
How Low Can They Go?
In other instances, it’s not a question whether homeowners will sell for less than it cost to build the house; it’s how low they’re willing to go. Take a 10,561-square-foot house designed by Rafael Vinoly in Ridgefield, Conn.
“The house’s original owner spent more than $25 million between design and build,” says Laura Ancona, a broker at William Pitt Sotheby’s International Realty who represents that home.
When its original owner died, her heirs left it to Fairfield University, which, after a few years, put it on the market “and sold it for a fraction of its value,” Ancona says. The closing number in 2012, according to Zillow, was just $2.7 million, well below the listing’s initial asking price of $10 million.
The property’s buyer quickly put it back on the market for $25 million, presumably in the hopes of making a quick profit. It failed to sell.
Now it’s back on the market—this time including an adjacent house on 11.23 acres for a total of $9.75 million. “When we listed it for $25 million, it was indicative of what [the seller] would have parted with it at the time, and now the price is indicative of his increased motivation,” Ancona says.
If the house sells for its current asking price, it will have lost more than half its value in 30 years, and that doesn’t factor in any value for the second property thrown in. “It’s not that the property is less valuable [than it once was], but it doesn’t matter if it’s a cool market or a warm market— this is still going to be an exception to the other properties in Ridgefield, Conn.,” Ancona says.
The Bright Side
The key to putting a price on these houses is to emphasize what Stockton, who represents the Selldorf house, calls a “replacement cost scenario.”
In theory, “it’s hard to put a value on it, because we’ve got a unicorn in the woods,” he says of the house, which is about a half-hour drive from the Vail ski resort. “Is it worth $29 million? Is it worth $25 million? Is it worth $32 million? It’s in the eye of the beholder.”
Stockton has permission from the home’s seller to sit down with serious prospective buyers and go through the building’s costs to show what it would take to create a comparable property from scratch.
There’s the cost of the land itself: The house sits on 70.5 acres and is surrounded by a network of private and semi-private hiking trails. Then there’s the cost of hiring Annabelle Selldorf (if she’d even take the work, never guaranteed with an architect of her firm’s stature). Add the cost of a contractor, a top-notch builder, and the materials.
For wealthy clients, when cost is no object, choices in marble, wood, tile, paint, and hardware can go a little haywire, explains Stockton.“I always say that when it comes to quality in the ultra-high-net-worth market, you have ‘good,’ ‘better,’ ‘best,’ and ‘might as well.’”
Finally, he suggests that prospective buyers consider the time that it would take to build a special house like this from scratch. “It’s a three-year endeavor,” he argues. “And most people don’t want to wait three years.” These projects are complete.
When buyers see all that, he says, “it validates the price so they can see it’s not so arbitrary.”
Inevitably, much comes back to whether or not the building’s cost is something the market can support. A seller can prove that a gold-plated house cost $1 billion to construct, but that doesn’t make the price tag easier to swallow.
“This house is something that’s truly unique,” Stockton says. But “uniqueness may hold a certain value for one person and much less for another.”
This article was provided by Bloomberg News.
